Editing by Li Panpan

IDM (Integrated design and manufacture) companies in China are showing dynamic performance in the last couple of years amid global IC shortages and the efforts to produce more domestic semiconductor substitutes. A new JW Insights article by senior analyst Murong Sujuan looks into their state of development and says, “With continued investment and R&D, it is likely to emerge leading IDM companies with global competitiveness from China in the next ten years.”

More excerpts from her article:

Ten IDM companies have made it into the  “China’s Top 100 Semiconductor Companies List” released last December by JW Insights. Among the ten, four are in the top 10, namely - Wingtech (闻泰科技), YTMC(长江储存), Silan(士兰微) and CXMT(长鑫储存).

The total revenue of the four IDMs companies in 2021 is expected to reach RMB39.2 billion ($6.16 billion), accounting for 18% of the total income of the top ten semiconductor companies. The revenue of 10 IDM companies in 2021 is expected to reach RMB46.609 billion ($7.33 billion), accounting for 13% of the total income of the top 100 semiconductor companies.

The improved performance of IDM players is related to the global shortage of chips, which are mostly analog chips mainly produced by IDM companies.

Analog chips are closely integrated with process design, and IDM has a natural advantage with independent design and manufacturing with dedicated processes.  This is a very virtuous cycle. This is the case in IDMs in Europe and the U.S.

In the case of tight production capacity, IDM's expansion is not as active as a pure foundry such as TSMC. The main reason is that IDM can obtain high-profit margins around 50% to 60% or even higher due to its specific processes, which are not affected by the current shortage of production capacity.

In addition, IDM companies are not as capable of adjusting production capacity as foundries, so they are worried about excess production capacity due to the expansion and construction of factories.

The global chip shortage has highlighted the importance of IDM. As early as two years ago, some industry entrepreneurs pointed out that judging from the current market, R&D investment, and chip technology development trends, there is the possibility that the next IDM giants with global influence will emerge in the Chinese mainland in the next ten years.